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RAND Review News for Spring 2010

Spending money to modernize the U.S. Air Force’s KC-10 air refueling fleet to meet upcoming global air traffic mandates would be more cost-effective than not spending the money, according to a RAND study.

The fleet of 59 KC-10 aircraft, which refuel other jets in mid-flight, has been operating for 25 years without significant modernization. International air traffic management mandates regulating the minimum communication, navigation, and surveillance capabilities for flying in certain regions and altitudes will take effect in 2015, with additional mandates scheduled for 2018 and 2020. To ensure that the KC-10 operates smoothly with civil air traffic control systems worldwide, the aircraft’s avionics systems need to be upgraded.

The study examined the cost of upgrading those systems (across a range of modernization options) relative to the costs of leaving the KC-10 noncompliant with the new mandates until the aircraft is phased out in 2045. Noncompliance would prevent the aircraft from flying the most fuel-efficient altitudes and routes and would cause delays on the ground and in the air — all of which involve costs. Most of the costs incurred from noncompliance would come from increased fuel expenditures to operate the KC-10. The remainder would come primarily from added costs for military personnel and for logistics support for contractors.

Upgrading a KC-10 (Lower Left Bar) Would Be Cheaper Than Not Upgrading It over a Wide Range of Cost Assumptions

SOURCE: Assessing the Cost-Effectiveness of Modernizing the KC-10 to Meet Global Air Traffic Management Mandates, 2009.

As the figure shows, the cost of upgrading a single aircraft, including a 50-percent cost increase to account for uncertainties, would just exceed $10 million. But this amount would still be less than the cost of noncompliance in all assumed circumstances. For example, if fuel costs are $3 per gallon and nonfuel costs grow at 2.5 percent, it would cost the Air Force $32 million extra to operate a single noncompliant KC-10 over its lifespan until 2045. With 59 of these aircraft, the cost to upgrade the entire fleet would approach $2 billion.

“Even if fuel costs only a dollar a gallon and there is no nonfuel cost growth, it still makes sense to pay to upgrade the avionics on the KC-10s,” said Anthony Rosello, a RAND senior engineer and leader of the study. “In fact, the savings from avoiding altitude restrictions alone — not counting the savings from avoiding delays — are still greater than the upgrade cost.”

The study also examined the impact of avionics modernization on the effectiveness of the KC-10 fleet in wartime operations. If modernization does not occur, the study concluded, wartime effectiveness would be degraded. Moreover, successfully executing wartime missions under the mandates without modernization would require more tankers, and the cost of the additional tankers would be comparable to the cost of modernization. KC-10 modernization would confer other benefits as well, including increased access to airports and continued access to established air refueling routes.

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